Publication year

The global economy has been growing at a moderate rate of around 3 per cent for many years. We expect to see similar growth figures in the coming years. But the election of Donald Trump as president of the United States has hugely raised the level of global uncertainty.

The global economy will continue to grow at around 3 per cent this year and next. Possibilities for boosting the economy through budgetary or monetary policy are limited, while political developments mean that effective economic policy is unlikely.

Economic growth is expected to slow down only slightly this year as global economic conditions are not as dramatic as recent financial markets turbulence suggests. There is no simple and accessible alternative to further monetary easing, whose effectiveness is diminishing while the negative side effects are compounding.

Institutional quality and economic development reinforce each other over the longer term, but we argue that institutional quality leads this virtuous circle. It unlocks growth potential and does not intrinsically suffer from diminishing returns.